Wellness’s Weakening Pulse : Companies Rethink Programs in Effort to Trim Health Costs

Corporate hysteria over skyrocketing health care costs is claiming a surprising victim: wellness.

The corporate wellness programs that flourished during the flush ‘80s are getting a hard look from accounting departments in these more threadbare days--especially because such health-promotion programs have a difficult time proving their worth with solid numbers.

As companies search for new ways to attack the high cost of health care and to cope with the slow economy, some are cutting back their wellness programs or trying to find ways to make them more tangibly successful. To supplement the traditional educate-and-exercise kind of wellness programs, some firms are now paying employees who toe the wellness line--or, less frequently, penalizing those with unhealthy habits.

“The wellness craze of the ‘80s was warm and fuzzy but for the most part didn’t save business money,” said Harry Harrington, director of the National Health Management Foundation, a division of Blue Shield of California.

“It doesn’t mean that they didn’t have good intentions and they didn’t create better health habits,” he said, but corporate health care costs have continued to soar.

The popularity of wellness programs makes them difficult to pick on, and there’s no doubt that such programs are flourishing at a number of corporations. And even in these rocky times, some companies continue to start or expand health-promotion plans, which include such things as education, exercise classes, screenings and programs to help smokers quit.

But some health care consultants say they are finding wellness programs a hard sell to clients who are frantic to slash costs.

“I see clients not willing to spend what it takes to offer a comprehensive health-promotion program,” said Colleen Murphy, a Southern California benefits consultant with the William M. Mercer Inc. consulting firm.

“There’s a basic agreement that a healthy employee is going to cost less,” Murphy said. “But I have clients that are laying off people and are trying hard to maintain benefits, and I’m not going to add a program that costs $300 or $400 a person.”

At the heart of the problem is proving that a wellness program saves a company money. Not only are studies expensive, but it is tough to put a price tag on a heart attack that didn’t happen because an employee started exercising, or lung cancer that was prevented by a stop-smoking program.

Critics of traditional wellness programs also wonder if mass efforts ever reach the employees who need them most and who run up the highest medical costs.

A survey last year of 618 employers by Hewitt Associates, a benefits consulting firm, found that most companies believe that their wellness programs have improved employee morale and health. But most also said the programs were not controlling medical costs or that they could not prove such a benefit.

“It’s very difficult to measure the value of some of these things,” said Larry Tucker, a Newport Beach-based health care consultant for Hewitt.

Johnson & Johnson claims great success for its health screening and lifestyle improvement programs that target all the major areas: blood pressure, weight, smoking, cholesterol, stress management and nutrition. Researchers who tracked three groups of Johnson & Johnson employees for five years discovered that hospital-cost increases were cut nearly in half at the participating J&J; facilities.

The program was such a hit that Johnson & Johnson formed a subsidiary six years ago to sell the concept to other companies. Although business is growing at a double-digit pace, it is not what the company had projected, said Ron Z. Goetzel, director of data analysis and evaluation services for Johnson & Johnson Health Management.

“Employers are telling us if (a program) doesn’t have anything to do with building this bomber or this machine, then it is jettisoned,” Goetzel said.

As part of an overall corporate cost reduction, First Interstate Bank sliced its wellness budget by a third last year. Still, Sue Hinkle, a First Interstate vice president who manages employee assistance programs, says the bank has been able to maintain health services by changing its methods.

For example, First Interstate uses its own fitness center employees to teach classes rather than hiring outsiders, and will accept a doctor’s OK for new fitness center members rather than doing its own testing, she said.

The health cost crisis has pushed some companies to try new things.

Blue Shield has begun promoting a program called Healthtrac that features traditional wellness aspects but also focuses on reducing demand for physician services by targeting certain high-risk people or those with chronic conditions who end up costing companies the most, Harrington said. Healthtrac works with those employees to minimize their treatment costs, he said.

A growing number of companies are using incentives or penalties as part of wellness or benefits programs to directly target certain problem areas. In other words, they are paying employees to get healthy.

“It’s a popular direction,” said Tucker of Hewitt Associates. “I think every employer that I’ve talked to in the last year or two has thought about it.”

At Hershey Foods, for example, employees in a pilot project who score well in five categories--they exercise, don’t smoke and maintain acceptable weight, blood pressure and cholesterol levels--can earn up to $264 in health credits toward the candy company’s flexible benefits plan. Those who fall short can be charged as much as $720 in debits.

Smokers at Rockwell International pay higher premiums for their group life insurance coverage than do nonsmokers.

In some cases, incentives are being used to soften the blow of higher medical plan deductibles or employee contributions.

Nissan Motor Corp. launched an incentive program at its Carson headquarters last month to lure employees away from its “deluxe” health care program, which reimburses 80% of expenses after a $150 deductible is met, said Bob Walpole, Nissan’s manager of employee benefits. Employees who opt for an HMO or a newer health insurance plan with a $250 deductible and 70% reimbursement can earn up to $400 in credits to pay for health improving efforts such as weight control programs, exercise equipment or even certain magazine subscriptions.

However, incentives and penalties for employee behavior can be a problem if a company cannot prove that the behavior actually costs the firm money, said Lewis L. Maltby, director of the American Civil Liberties Union’s National Task Force on Civil Liberties in the Workplace.

“The whole thing is troubling,” Maltby said. “Everybody does something in their private lives that their doctors and their mothers wish they wouldn’t do. . . . Do we really want our employers knowing this much about our private lives?”

Wellness Check-up

A 1992 survey of 618 employers found that health-promotion activities may be improving employee health but were less effective in controlling medical costs.

Effectiveness of Activities in Improving Employee Health

Of the 223 employers who cited improved employee health as their most important objective, 46% said their activities are either very effective or effective in meeting that objective. Very effective: 4% Effective: 42% Slightly or not effective: 13% Not sure: 41%

Effectiveness in Containing Medical Costs

Of the 163 employers who cited containing medical costs as their most important objective, 27% said their activities are either very effective or effective in meeting that objective. Very effective: 3% Effective: 24% Slightly or not effective: 32% Not sure: 41%

Source: Hewitt Associates